Westerly Hospital sale moves forward

Wakefield, R.I. - Lawrence & Memorial Hospital moved one step closer to acquiring The Westerly Hospital on Tuesday, after no major objections were raised in a sales hearing in Rhode Island Superior Court.

Judge Brian Stern said he would render a decision Thursday on L&M's offer to purchase the financially troubled smaller institution for $69 million in cash and other financial commitments.

If approved, the offer commits L&M to assume $22 million in Westerly Hospital debts to secured creditors and bond holders, and would infuse $6.5 million into the hospital in the first two years to fund a turnaround plan. It would also make a $30 million investment in new technology and equipment for The Westerly Hospital over the next five years, and commits to maintaining it as an acute care hospital and to retaining all current services and employment levels for at least two years.

Attorney Mark Russo, the court-appointed special master for the receivership case, said L&M's offer met all the criteria set for the acquisition in an earlier court proceeding. After soliciting L&M's "stalking horse" bid this spring, Russo said, he sought out better offers, but none were made.

"We met with two for-profit hospital networks, and other hospital networks in the state, and with partnerships of non-profit and for-profit hospitals," he told Judge Stern. "We had discussions with high level executives of those systems. At the end of the day, they all said, 'Give me a call if anything changes, but you've got a good offer.' This has been a very rigorous and very transparent process, and it's produced an offer that's been market tested."

Russo recommended the court approve the agreement with a few additions, including a mechanism for enforcement if L&M fails to meet its commitments.

During the proceeding, Stern invited comments, questions and objections on the proposed sale from members of the audience in the packed courtroom. Among those attending were Westerly Town Manager Steven Hartford, representatives of hospital unions and attorneys for Blue Cross Blue Shield of Rhode Island and Washington Trust, Westerly Hospital's largest creditor. No major objections were raised. Attorneys involved in a dispute over the North Stonington Health Center, which Westerly Hospital operated for about a year before it was closed by Russo, agreed to work out a resolution in bankruptcy court, separate from the receivership case.

Among those who told the court they supported the sale were Dr. William Conlin, president-elect of The Westerly Hospital's medical staff, and attorney Chris Callaci, representing the United Nurses and Allied Professionals union.

"The union members made very painful and very difficult decisions for themselves and their families, and played a very central role in this process," Callaci said, referring to a new contract recently reached with L&M that includes wage and health insurance and pension concessions. "We are in full support of this transaction, and we're looking forward to working with L&M to secure a brighter future for the hospital."

Representatives of The Westerly Hospital Foundation, an independent organization that raises donations for the hospital, said that while they support the sale, they want to ensure that their foundation retains local control and that all donations it receives be used in Westerly.

"It's our obligation to always honor the donors' intentions," Bruce Cummings, L&M president and chief executive officer, responded while on the witness stand to a question posed by Jennifer Schwindt, chairman of the foundation.

L&M Chief Financial Officer Lou Inzana said L&M has secured a commitment from a bank to provide the financing necessary for the deal.

For L&M, the acquisition of The Westerly Hospital is an opportunity to significantly expand its geographic reach and better position itself to remain strong in the changing health care environment, Victor Milione, attorney for L&M, told Judge Stern.

If approved by Judge Stern, the agreement would have to be reviewed and approved by federal and state regulators before becoming final. A January closing date is expected.